The Proof-of-Stake (PoS) consensus algorithm has been criticized, in the literature and in several cryptocurrencies communities, due to the so-called compounding effect: who is richer has more tokens to put in stake, hence higher probability of being selected as a block validator and obtain the corresponding rewards, thus becoming even richer. In this paper we present a PoS simulator written in the R language, that allows to tweak several parameters of the consensus algorithm and observe how the distribution of tokens among the users evolves over time. This tool can be used to investigate which combinations of parameter values allow to obtain a "fair" consensus algorithm, in which no one gets richer or poorer by the mere act of validating blocks.
Leporati, A. (2023). Studying the Compounding Effect: The Role of Proof-of-Stake Parameters onWealth Distribution. In Distributed Ledger Technology Workshop Proceedings of the Fifth Distributed Ledger Technology Workshop (DLT 2023) (pp.1-14). CEUR-WS.
Studying the Compounding Effect: The Role of Proof-of-Stake Parameters onWealth Distribution
Leporati A.
2023
Abstract
The Proof-of-Stake (PoS) consensus algorithm has been criticized, in the literature and in several cryptocurrencies communities, due to the so-called compounding effect: who is richer has more tokens to put in stake, hence higher probability of being selected as a block validator and obtain the corresponding rewards, thus becoming even richer. In this paper we present a PoS simulator written in the R language, that allows to tweak several parameters of the consensus algorithm and observe how the distribution of tokens among the users evolves over time. This tool can be used to investigate which combinations of parameter values allow to obtain a "fair" consensus algorithm, in which no one gets richer or poorer by the mere act of validating blocks.
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